Chiefless Company Rakes In More Than $100 Million

Can a company run itself without executives or managers or a board of directors? One of the more radical experiments in technology aims to find out.

A group called DAO, which stands for Decentralized Autonomous Organization, is running itself via computer code on a network. Every operating detail, from governance to day-to-day operations to payment schedules, is laid out in the code that runs the company. There are no incorporation papers, board of directors or CEO.

The DAO began a crowdfunding effort on April 30. It is collecting money not in dollars or even the virtual currency bitcoin. Instead, it is fundraising on the Ethereum platform, an alternative version of bitcoin. It plans to use the money it raises to fund startups building applications on Ethereum, and as of Saturday had raised more than $107 million, according to the company’s publicly viewable digital wallet on Ethereum.

That makes it already one of the best capitalized cybercurrency startups. The largest private capital-raising for a startup in that technology field was the $116 million that 21 Inc. raised in March 2015.

DAO will raise funds until its self-imposed deadline of May 28. It has topped the $75 million raised by Coinbase, the $60 million raised by Digital Asset Holdings and the $55 million raised by Blockstream.

The group that built the DAO, mainly people from the Ethereum developers group, expected to raise around $20 million, according to Stephan Tual of slock.it, the startup that wrote the DAO’s code. “It’s really surprising,” to see the total raised so far, he said.

This is how the crowdfunding works: DAO is accepting ether, the cryptocurrency used on Ethereum, in exchange for DAO tokens. For every one ether invested, 100 DAO “tokens” will be created. The tokens will operate like an internal currency.

The funds are deposited in DAO’s digital wallet on the Ethereum network. Like bitcoin, all transactions are public and viewable on the websites like Etherscan.

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“It’s the first real experiment we are seeing in ‘programmable’ governance beyond bitcoin or Ethereum as systems themselves,” said Fred Ehrsam, the co-founder of bitcoin startup Coinbase. Mr. Ehrsam wasn’t involved in building the project, but did invest a small amount in it, he said.

In some way, DAO is like any traditional venture fund, and is clear in stating it is a for-profit venture. But a venture capitalist doesn’t decide who gets funding.

Instead, everybody holding DAO tokens gets a vote on funding candidates proportional to their holdings. If the startup passes the vote, it gets funds. Everything about the relationship, from the amount of funding to the specific type of funding, whether the DAO takes a percentage of the profits or an equity stake, would be laid out beforehand in the proposal.

“It’s not bound by terms of law and jurisdiction,” said Mr. Tual. “It’s bound by code.”

Still, DAO as a live experiment is sure to get its tires kicked from everybody from investors to government regulators the world over. Everything about it is new, Mr. Tual acknowledges, and will have to be tested in real-world situations. He said he has been in touch with government officials and regulators in a few European countries and is optimistic in what he has heard.

“People make a big deal out of governments stomping on this stuff,” he said. “I think they’re going to embrace it.”

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